Under pure competition in the long run: A. neither allocative efficiency nor pro
ID: 1206685 • Letter: U
Question
Under pure competition in the long run: A. neither allocative efficiency nor productive efficiency are achieved. B. both allocative efficiency and productive efficiency are achieved. C. productive efficiency is achieved, but allocative efficiency is not. D. allocative efficiency is achieved, but productive efficiency is not. 8. Which of the following is correct? A. When total product is rising, both average product and marginal product must also be rising. B. When marginal product is falling, total product must be falling. C. When marginal product is falling, average product must also be falling. D. Marginal product rises faster than average product and also falls feaster than average product. 9. Which of the following is most likely to be a variable cost? A. fuel and power payments B. interest on business loans C. rental payments on IBM equipment D. real estate taxes 10. Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units ouput. This corporation: A. should close down in the short run. B. is maximizing its profits. C. is realizing a loss of $60. D. is realizing an economic profit of $40. 11. The demand curve in a purely competitive industry is, while the demand curve to a single that industry is. perfectly inelastic, perfectly elastic downsloping, perfectly elastic down sloping, perfectly inelastic perfectly elastic, downsloping 12. When compact disc (CD) players first came on the market, they sold for over $1,000. Now they $100. These facts imply that: A. the CD industry was once competitive, but is now monopolistic. B. fewer firms produce CD players than was the case five or ten years ago. C. the demand curve for CD players has shifted leftward. D. the CD player industry is a decreasing-cost industry. 13. Which of the following is not a basic characteristic of pure competition? A. considerable non price competition B. no barriers to the entry or exodus of firms C. a standardized or homogeneous product D. a large number of buyers and sellersExplanation / Answer
7.
Correct Answer:
B. Both allocative efficiency and productive efficiency are achieved.
Explanation:
Under pure competition in the long run,
P = MR=AR = MC
It creates allocative efficiency. Also, at this level, output is produced at lowest ATC. Thus, it creates productive efficiency for the firm under pure competition.
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